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Precious Metals Saw Their Worst Quarter in a Year

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Worst quarterly performance

All the precious metals saw a down day on Monday, October 19, 2015. Gold and silver futures fell by 0.87% and 1.7%, respectively. Gold prices are trading far above their 100-day moving average price of $1,142.10 an ounce.

Most analysts and experts have a negative outlook for the precious metals. Gold fell 5% in the third quarter of 2015, its worst quarterly performance in a year. Silver too was down by 7.8% in the third quarter. Gold is holding near its 200-day moving average price, a level it broke last week for the first time since May. The common factor that is affecting both the precious metals is the looming rate hike fear. The increase in rate could cut the opportunity cost of holding non-yielding precious metals.

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Mining ETFs and miners

The mining ETFs that have seen a drop in their prices in the past year due to retreating bullion prices include the SPDR S&P Metals and Mining ETF (XME) and the Global X Silver Miners ETF (SIL). The mining companies too have slipped almost 50% from their prices in 2014. Mining companies like Yamana Gold (AUY), Kinross Gold (KGC), and Alamos Gold (AGI) have lost 59.9%, 29.8%, and 50.8%, respectively, on a one-year trailing basis. These three companies together make up 8% of the VanEck Vectors Gold Miners ETF (GDX).

Soft demand from China and India has also taken a toll on the precious metals. Gold discounts in India reached a three-month high this week on sluggish retail demand. The spotty monsoon season in India is the major factor affecting gold demands in the country. China’s devaluation in August likely had the most impact on the country’s buying power. Also, the weak industrial demands kept adding fuel to the fire.

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